November 26, 2022

Has the paradigm shift begun?

Posted on 18. Jul, 2013 by Stephan Helgesen in Economy

When any armchair economist, amateur psychologist or novice market-watcher looks at the last five years of America’s recession and the 30 years leading up to it and then takes the trouble to lay out all the facts and stats on the kitchen table, it’s not difficult to conclude that maybe the great American economic model has finally entered its otium cum dignitate.

Granted, the rest of the world lives in the same neighborhood of rising social demands, shrinking tax bases, eroding economies of scale, ultra-competitive markets, balance of payments pressures and burgeoning debt, but they are not the USA. We are. We do things differently, or do we?

There are two economic belief systems at work in Washington DC and around the country. Both are attached at the hip to the two political parties. The Republicans believe we should cut government spending, get lean and mean and save our way out of the recession and preserve the current wealth distribution levels. On the other side of the aisle, Democrats are convinced that if we will only spend more taxpayer dollars, create more government jobs, conjure up more ‘stimulus packages,’ redistribute more of America’s wealth by taxing the rich and have the Treasury pump billions more into our economy that everything will be hunky dory.

Both are missing the point.

Prosperity is hiding, but it’s not in some out of the way alcove in America’s boardrooms or in a secret memo in a Wall Street hedge fund office. It’s certainly not sequestered in the halls of Congress or in the White House, either. No, it is hiding in all of us, masquerading as the fear of change and cloaked in the mantle of intractable tradition.

Let me explain. Millions of Americans have been brought up to believe that our country rests on a solid, impenetrable foundation that never moves, never changes and never should change. Some would say that that foundation is the Constitution. Others will tell you it’s our values, and a third group would point to the heavens and say that it’s God’s will, as “He has ordained the democratic capitalist system for us to follow.”

The truth is, America, like every other country, grows up and grows older and changes along the way. In its youth, America was rebellious. In adolescence, it swam upstream a bit, and now that it’s approaching middle age it’s gotten a little soft, a little tired, a little nostalgic and more than a tad unwilling to change. I can’t fault all Americans, maybe just those who, like myself, grew up without a Depression a World War or a massive natural disaster to contend with.

This article is not about assigning blame. It’s about getting real, waking up and manning up to the reality that in order for us to move forward we may have to move backward a few steps so that we can review our attitudes, realign our economy and expectations and re-think what America is really meant to be.

If we are religious, we believe that God meant for our country to be an example of compassion, openness and inclusion for the rest of the world to emulate. If we’re non-believers, the Divine Providence argument can be easily replaced with one based on the preservation of individual rights and freedom.

The status quo has been kind to many in our society, that is until the bubbles of Wall Street, housing, and Dot com burst, leaving millions with emaciated portfolios and then, later, when the great downsizing of American business began, eliminating millions of jobs leaving middle-aged, near retirement-age workers to fend for themselves.

There’s no shortage of villains in today’s America. Take your pick. There’s government, business outsourcers, China, Congress, the Administration, right-to-work states, but there’s one über villain that controls all of them…intransigence and intractability.

Times have indeed changed, but many of us are unwilling to acknowledge that simple fact. There are more Americans to be fed, housed, clothed, educated and employed than we care to think about. “Ten pounds of potatoes won’t go into a five-pound sack,” my grandmother always used to say, and she was right.

An immigrant from a country that experienced enormous poverty in the last few decades of the 19th century, her measurement of success was having enough to eat and a place to stay dry…and that attitude stuck with her until she died.

Her generation was accustomed to change and viewed it as natural (if not uncomfortable and frustrating). They adapted to circumstances and made the best of what they had. Some today would say that their expectations were okay for them but not for us.

They are simply too LOW! “Our jumping off point is higher, therefore our expectations should be higher,” say the young among us, “why should we tighten our belts when you did nothing but loosen yours for decades!”

That remark reflects one of our biggest problems, perception. Our planet is not expanding to accommodate the millions of people added to its surface every year. Our resources are not increasing, commensurately. Our construction sprawl is threatening our natural world and disturbing the natural balance.

On a business level, the markets for new goods and services are expanding, thereby creating the prospect of potential prosperity, until you realize that many former markets for our exports have now become domestic producers of the same goods and are exporting them back to us!

The world economic order is held together by international trade agreements and a complex body of regulations AND by the market forces of supply, demand and the profit motive. Traditional thinking has kept them all going in the same direction in the 20th century until Communism came along.

Tested in practice, the experiment failed and ‘free marketeers’ shifted into higher gear and traveled the predictable path of strengthening their own hands while championing free trade for all.

The aggregation principal – of capital or other resources – creates larger wholes, but it also creates greater vulnerabilities. We saw this in the banking crisis in 2008/9 when a new, more dangerous principle took over – too big to fail (TBTF). TBTF was never meant for the private sector; it was always reserved as a last resort solution for cash-strapped countries. America’s mistake was allowing it to be used, privately.

Today, fear (of the unknown) and distrust (of institutions) rank high as considerations in corporate decision-making and may just be precipitating the death roll for America’s great economic paradigm. Ironically, this could be a positive thing for our country.

In fact, some of the changes are already occurring, perhaps in no small part to the lack of adequate financing and massive corporate downsizing. Take crowdfunding or co-working. Each is built on the concept of smaller groups coming together with a collective (but open) mindset to accomplish common tasks, unencumbered by an oppressive bureaucratic hierarchy.

Knowing when to change is every bit as important as knowing how to change. America needs to create a new business structure that’s built on our innovativeness, creativity, productivity, flexibility and pluck. It needn’t be rooted in manufacturing, but it must have a strong manufacturing component to it.

We must be able to control the manufacturing apparatus instead of being at the mercy of foreign production lines. It can’t be solely rooted in services, either, because we cannot develop a diverse economy simply by providing services to one another.

While my generation has been pretty good at recognizing opportunities, it’s time to join up with the young entrepreneurs of today and build a new foundation that can grow and prosper using new methods and by setting realistic short, medium and long term goals that fit within a nationally-beneficial framework designed to empower the American people to think and do for themselves.

This will take leadership, commitment and cooperation. That’s why we need to encourage our political, business and cultural leaders to engage in a national dialogue on what we want America to be in the 22nd century. Maybe a good starting point would be a motto like: “Size matters: bigger is just bigger, but smaller is smarter.”

- Editor























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